New York state government ended the calendar year with about a $600 million shortfall in its main operating fund for the first time in recent history, requiring the state to use most of its reserves to pay December’s bills.

The deficit in the general fund illustrates the difficult financial situation New York continues to face, Gov. David Paterson said Thursday.

While he stressed the state can meet its obligations, Paterson said, “Our state is spending beyond its means. Our state is running out of money.”

Paterson indicated that revenues are expected to pick up in January, allowing him to restore $750 million in aid to schools and local governments that he withheld in December due to the cash crunch.

School groups have sued Paterson over the delayed payments, but have postponed the court proceedings in hopes that Paterson will restore the money.

Comptroller Thomas DiNapoli said the state ended the year with about $883 million cash on hand, a little more than half of one percent of the total $132 billion state budget.

But Paterson said most of that will have cover the $600 million general-fund deficit, leaving a paltry $283 million left in the state’s coffers. Budget officials, however, said it’s unclear just how much money the state will have in the bank after all the bills are paid.

Paterson said that if revenues pick up, the state could face a $7 billion to $8 billion budget deficit when the 2010-11 fiscal year starts April 1. Paterson had been predicting a $9 billion gap.

DiNapoli warned that the state must cut back on spending, knocking the current budget adopted last April as fiscally unsound. He said the state is starting the new year in a “tenuous financial position.”

“New York dropped the ball,” DiNapoli said. “The state’s New Year’s resolution must be to make better budget decisions.”

Gov. David Paterson this morning shot down what he said were “rumors” that some state lawmakers are talking about another tax on the wealthy to help the state’s finances.

“I heard a rumor yesterday that some of my colleagues are talking about another millionaire’s tax and that would demonstrate, I would say, a completely addictive personality,” Paterson said this morning on 710-AM (WOR) in Manhattan.

Lawmakers and Paterson in April agreed to raise income taxes on individuals making more than $200,000 a year. But because of the poor economy and some of the wealthy packing up and changing their residencies (see Rochester billionaire Tom Golisano), Paterson said it has produced about 10 percent less than the $4 billion the state anticipated in new revenue.

“The rumor isn’t traceable to anybody, but somebody just mentioned that to me yesterday and I thought, I can’t believe at this point that we never get it,” he said.

Lawmakers and Paterson — who initially rejected higher income taxes on the wealthy — agreed to raise more than $7 billion in new taxes and fees in the current year’s budget to close a roughly $18 billion budget gap. The state faces about a $9 billion gap in the 2010-11 fiscal year, which starts April 1.

Senate Democratic Leader John Sampson, D-Brooklyn, told reporters this week that he would not support any new taxes or fees in the next fiscal year.

The rush of teachers seeking to get into the current retirement system before it expires tomorrow has grown to a whooping 4,873 applications this month — nearly five times the amount in December 2008, when 1,043 teachers applied.

State lawmakers this month passed Gov. David Paterson’s proposal to start a new Tier V pension system, which provides less generous retirement benefits aimed at lowering the soaring pension costs for state and local governments.

The changes include requiring new employees, including teachers, to pay 3.5 percent of their income toward retirement for their entire career, compared to the current 3 percent for 10 years.

The new law prompted a rush of teachers signing up to secure their place in the old system, according to the New York State Teachers’ Retirement System.

And the numbers have grown significantly even since last week. The Associated Press reported last week that 3,198 workers entered the more generous pension tier this month. But the applications are up more than 50 percent in just a week.

The New York State United Teachers encouraged its members to join the system before it changed.

Morgan Hook, a spokesman for Gov. Paterson, said the new pension tier will save billions of dollars but “still, it is extremely unfortunate that any group or individual would seek to game the system and violate the spirit of the law.”

Assembly Speaker Sheldon Silver, D-Manhattan, said he expects Attorney General Andrew Cuomo to run for governor next year, making Silver the highest ranking Democratic official to indicate unequivocally that Cuomo is plotting a gubernatorial run.

Cuomo has been coy about his plans as he stockpiles campaign cash and quietly lays the foundation for a likely run for governor, a seat held for three terms by his father from 1983 through 1994.

“I do,” Silver answered when asked by Fred Dicker this morning on Dicker’s radio show whether he expects Cuomo to run. “I think he’s clearly showed he’s popular and has always wanted to be governor, and I think he thinks it’s his opportunity.”

Cuomo has only said he’s focused on running for re-election for attorney general next year, but most Democrats across the state expect him to run for governor and polls show him with a wide lead over Democratic Gov. David Paterson in a potential primary and any Republican planning a run.

Paterson said he plans to run for election, likely setting up a contentious primary with Cuomo.

For his part, Silver said he has no plans to endorse a candidate until June. Senate Democratic Leader John Sampson said earlier this week that he’s not prepared to back Paterson’s election bid, saying “My concern is about our conference, the 32 members of our conference.

When it comes to who he would endorse, Silver said “I want to do what’s best for the Democratic Party.”

Gov. David Paterson’s office said today that the New York State United Teachers and other school groups are seeking a delay in their lawsuit that claims Paterson is illegally withholding school aid because he claims the state is running out of money.

It prompted this statement from Paterson’s spokesman Morgan Hook:

“When NYSUT’s lawyer went before a New York State Supreme Court judge on December 16, he argued for this case to be heard on December 23, because he said the impact of the Governor’s actions was ‘immediate and severe’ and that ‘layoff notices are going out.’ His request was denied. Now, less than two weeks later, this same legal team wants to delay the case even longer,” Hook said.

“Clearly, dire warnings of ‘immediate and severe’ consequences were nothing more than scare tactics.”

NYSUT vice president Alan Lubin told the Daily News that they simply want more time to discuss the case and that there are no plans to drop the lawsuit unless Paterson agrees to pay back the money.

The school groups sued, saying the money was adopted as part of the 2009-10 budget and can’t be illegally withheld, something Senate Democrats also agree with but didn’t join the lawsuit.

Paterson said the money would be paid back if the state has the money to do so.

“Governor Paterson took bold action to ensure the state did not run out of cash and to protect New Yorkers from special interests who are looking to maintain the status quo for their own benefit and to the detriment of the people of New York,” Hook said. Governor Paterson will not allow the state to run out of money on his watch.”

Updated: Here’s NYSUT’s statement.

“The issue of whether the state must meet its obligation to students and school districts is a serious one that goes beyond posturing and politics.

“Since NYSUT and a coalition of education groups filed suit on December 16, the Governor, in his public statements and legal papers, has stated that school aid payments would likely be made in mid-January, protecting student services from harm; employees from layoff notices and New Yorkers from higher property taxes — all of which would have resulted if school aid payments had been withheld indefinitely.

Our main concern has been, and always will be, ensuring that school districts receive the state aid lawfully approved by the Legislature . A brief postponement in the legal proceedings should not be read as anything more than time needed to respond to the state’s gratifying change in its position.”

Schumer is seeking a third term next year and so far no Republicans have even hinted at running against him. The one who ran against him in 2004, the Hudson Valley’s Howard Mills, lost in record fashion, with Schumer picking up 71 percent of the vote. Democrat Randy Credico is planning a primary against Schumer.

A Marist College poll last month found that 54 percent of registered voters statewide think Schumer is doing either an excellent or good job in office while 29 percent rate him as fair, and 13 percent say he is performing poorly.

In a news release, Schumer cites his accomplishments this year as including: putting in a provision in the stimulus package that sent money to county governments to prevent layoffs and property-tax increases; getting a $2,500 college tuition tax credit for families; saving jobs upstate by helping to convince General Motors to repurchase two Delphi Automotive parts plants; securing about $300 million in aid for the nation’s dairy farmers and helping to keeping Hickey Freeman, the upscale suit manufacturer in Rochester, to stay open.

His office said this year’s tour included 13 trips to Albany; 16 to Erie; 17 to Monroe; 14 to Onondaga; and 22 to Westchester and Rockland counties. He made 11 trips to the North Country, 12 trips to the Southern Tier, 25 trips to the Capital Region, 25 trips to Western New York, 47 trips to the Hudson Valley, 26 trips to Central New York, and 25 trips to the Rochester-Finger Lakes.

Senate Democratic Leader John Sampson, D-Brooklyn, spent about a half-hour this afternoon with reporters at the Capitol to discuss the year that was and his plans as conference leader for 2010.

First, he said that the recommendations from a panel investigating what punishment Sen. Hiram Monserrate, D-Queens, will face for misdemeanor assault involving in his girlfriend may still be weeks away.

And he said senators should not be calling for a vote to expel Monserrate before the panel finishes its work. It’s meeting again tomorrow.

“Some of our colleagues, some of our members need to understand that then why should have I instituted a committee then if you’re going to go off and operate in rogue and just put a resolution in?” Sampson said.

“We shouldn’t jump out ahead of our committee.”

Sampson took over the leadership of the Senate Democrats in July after the leadership coup upended its fragile 32-30 seat majority. With Sampson at the helm, Sen. Malcolm Smith, D-Queens, was expected to step aside in January as Senate president after the coup happened on his watch.

But so far, that hasn’t happened, and Sampson indicated that he’s comfortable with that. Of course, that could change if members want a change, he suggested.

“We have a leadership team. I’m in charge of the administrative and legislative agenda,” Sampson explained.

Following Rudy Giuliani’s endorsement last week of Rick Lazio for governor, Erie County Executive Chris Collins released a letter today from 15 county GOP chairmen encouraging him to run for the governor.

This is perhaps the first big move by Collins to show he likely will run for governor next year. He said last week he’s willing to push it to a primary against Lazio, if that’s what it takes.

Lazio has picked up the endorsement of at least eight GOP chairmen, including the big ones of Suffolk and Monroe.

But Collins — and his supporters — appears undeterred by Lazio’s growing support. Among the large counties asking Collins to run include those in Erie, Onondaga and Albany.

“As leaders of the Republican Party in counties across New York,” the chairs wrote to Collins, “we recognize that the time for bold and committed leadership is now. That is why we are asking you to run for Governor of New York as the Republican nominee in 2010.”

An audit today by Comptroller Thomas DiNapoli may get at one of the complaints by Gov. David Paterson about school districts: they are sitting on big reserve accounts but are suing over his delay in payments.

DiNapoli’s audit found that Fairport Central School District built up $16.6 million in excess funds over five years while increasing the tax levy by 17 percent.

DiNapoli said the money could have been used to reduce property-tax levy or pay one-time expenses.

“All across New York, families are watching every dime and school districts need to do the same,” DiNapoli said. “Fairport Central School District needs to use more realistic budget numbers. Taxpayers should not have to pay more property taxes than necessary.”

DiNapoli’s release said that the audit, covering July 2003 through May 2009, found the district consistently overestimated expenditures and underestimated revenues, resulting in significant operating surpluses from 2003-04 through 2007-08 which totaled $26.2 million.

James Lawrence has, for the past 14 years as Editorial Page editor, been responsible for producing more than 5,100 daily Editorial and Speaking Out pages. He started his journalism career in Cleveland shortly after graduating from Howard University in Washington, D.C. Along the way, he has had career stops in Denver, Orlando, Fla., and White Plains. But unquestionably, he says, some of his most rewarding years as a journalist have been here in Rochester, being a part of positive change. That change has included reforms that followed an aggressive “Challenging Albany” campaign, greater public awareness and pushback against the coarsening of our culture, and strides being made to make this region a destination community.

Jane Sutter became deputy editorial page editor in June 2009. She also has served as managing editor and general manager/custom content at the Democrat and Chronicle. She writes editorials on many topics, with a focus on health and education, helps plan and edit copy on the Editorial and Speaking Out pages, oversees the Board of Contributors and assists Editorial Page editor James Lawrence in managing the department. She has worked as a reporter or editor for newspapers in Iowa, Illinois, Florida, South Carolina and Elmira, where she was executive editor of the Star-Gazette. She recently received her master’s degree in media management from the University of Missouri School of Journalism.

Cara Matthews has been a statehouse correspondent in the Albany Bureau since August 2005. Prior to that, she covered Putnam County government and politics at The Journal News for nearly five years. Before that, she worked at newspapers in Connecticut and covered the state Legislature for one of them.

Brian Tumulty has worked in the Gannett Washington Bureau since 1992, first as a national business writer and then as a regional reporter for newspapers in New York, Iowa, Michigan, Minnesota and Wisconsin. A native of the New York City borough of Queens, he attended high school on Long Island and college in the Bronx. He has four children and one granddaughter.